“Board membership is rewarding, though it requires constant self-reflection on whether one has the time and is acting in accordance with the assigned role. Regardless, board work is a task of honor and a pilar of active ownership, enabling the development of companies and entire industries,” writes Pontos’ Investment Manager, Real Estate, Kati Konsti.
Continuous development is one of Pontos’ values. We operate as an active and long-term owner on the boards of directors of our portfolio companies.
This spring, I took it upon myself to learn more about working on the board level at the Boardman course. I gathered a few tips for everyone, with the remaining year and coming board fall in mind.
Key tasks of the board are approving the strategy, identifying risks and appointing the CEO. The board monitors and oversees that administration, bookkeeping and finances are arranged properly.
As a board member, you will always represent the company whose board you are on. It is important to acknowledge if there are several roles in relation to the company, as the tasks of the owners, board and management differ from each other.
Especially in startups and family-owned companies, the ownership position, representation of the operational management and membership of the board can be assumed by the same people. In this case, an ownership steering group should be established for the purpose of ownership strategy and investor relations.
If the company’s interest conflicts the owner’s interest, your decision as a board member should be based on the company’s interest. As a board member, you also need to remember that the principle of equality needs to be realized. Decisions should not result, for example, unjustified financial gain to the majority owners at the expense of the minority.
Owners, i.e. the Annual General Meeting has the final power of decision in company matters. As such, decisions by owners and the ownership strategy, must be discussed in a forum outside the board meeting.
Working in the board of directors is about continuously mapping out the markets and the operating and regulatory environment to support the company’s operations. The most valuable asset of a board member is strategic thinking: Will our actions now also work in 10 years? What risks are there in the horizon? What future scenarios are there?
You can also utilize data: how many times does a certain word such as ”sustainability” come up in Google, Capital Markets Day or partner offers? This is a clue on market trends.
As a board member, you need to be curious by nature. Read news from the industry and keep up with discussions. Tell the CEO and operational management you can provide sparring assistance if needed.
The following rules of thumb can help survey the company’s situation: financial reports reveal the past, customer feedback indicates the current situation, and the personnel’s enthusiasm for work and ability to make good decisions in the team inform the board about what matters most: the company’s future, ability to change and resilience.
When it comes to the board member’s responsibility, official meeting materials and minutes (including attachments!) need to be clearly documented. A board member will not be personally held financially accountable for what turns out to be a bad board decision if thorough decision-making can be proven. A board member can also be acquitted from responsibility in decision-making by voting against or resigning from the board.
In the Annual General Meeting, strategic matters are at the core of the agenda. They should take up at least half of the meeting. An annual clock for board work and scheduled meeting topics are useful in planning the agenda.
Each board meeting should start with every board member taking a minute to express what they believe to be strategically relevant about the company’s operating environment.
The chair of the board is tasked with considering all the views of the board members and deepening the conversation when needed. The chair should be able to summarize the views of others and only then bring their own opinion to the table, separate from the discussion.
Preparing board materials requires company resources, and this burden can be eased by including the operational management in board meetings. The management must be able to crystalize the key points, and your task as a board member is to present critical questions to the management: Have the reputational risks of the operations been considered? Is the cash balance in order? Are the right people steering the company’s strategy?
It is highly recommendable to have a discussion at the end of the board meeting on ownership or among the board without the management. Trust between the board and CEO is crucial – the CEO should get an update on the most important decisions.
Although the Annual General Meeting, in principle, appoints the board, the board should also regularly evaluate its own work. The areas of evaluation are identifying the current state and possibly adding new and necessary competence.
Board members’ competence can be mapped out with a chart, where each current or potential board member can mark their own strengths. A stakeholder survey can also be used to measure the work – we are just reintroducing one at Pontos. Active ownership themes provide us with information from our portfolio companies and partners on how we can improve our operations. In addition to capable board members, the company can hire separate advisors to bring necessary insights for developing the company.
P.S.: Interested in board work but not sure how to get there? Express your interest out loud and clarify what competence you can offer the company. Call the chair and let them know you are available, and tell them what type of person you are and where your strengths lie. Like in all job-hunting, you can also contact a headhunter.
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